Promoting Active Ownership
Members of the Tri-State CRI take active ownership of their investments through robust shareholder engagement and proxy voting in order to address environmental, social and corporate governance concerns. In the United States and in varying degrees internationally, investors in publicly owned companies are part owners of the corporation. This ownership provides certain rights such as annually voting a proxy and raising concerns before management and the Board of Directors.
In the last few decades, a growing number of shareholders have participated in a variety of strategies to exercise ownership over the corporations they are invested in. By actively engaging with the corporations they are invested in, shareholders can influence the activities of corporations for the enhancement of both shareholder value and social justice concerns. The Tri-State Coalition engages in the following strategies of Active Ownership, providing resources, coordination, and support to members in pursuing these tactics:
Communication with the Company
Investors often have concerns about corporate practic
es. Initial letters of inquiry attempt to access information regarding issues. Very often this will satisfy investors or will result in a meeting that will provide additional information.
Filing Shareholder Resolutions
At times corporations will not adequately disclose information, or such information will raise additional concerns. Filing a shareholder resolution outlines the concerns of the stockholder and asks for a certain action by the company or Board of Directors. In other circumstances, while communications may continue, a shareholder proposal is filed simply to secure additional exchanges or keep the concerns before all shareholders. A shareholder resolution must be no more than 500 words and avoid suggestions of “ordinary business”. A legal “filing letter” and verification that the shareholder(s) own at least $2,000 worth of stock must accompany the resolution. A proposal presented by a shareholder is typically non-binding. A successful shareholder resolution garners 3% of the vote the first year, 6% the second and 10% in subsequent years in order to be considered for another year. For resources on filing shareholder resolutions, click HERE.
Substantial work can be accomplished in corporate dialogues. When Tri-State CRI members and allied investors meet with management in a dialogue format it often becomes clear to the company that these parties are critical stakeholders with both concerns and expertise not readily available within the corporation. Enabled by the format of a confidential dialogue, Tri-State CRI and ICCR members have been able to raise difficult and challenging concerns in an atmosphere of trust. While not all companies have this experience, a growing number of corporations look to use this dialogical process to address concerns. Many refer to this as an “insider strategy” as contrasted by typical “outsider strategies” that may include demonstrations, boycotts, etc. However, Tri-State CRI believes that these strategies complement each other. While corporate dialogues have at times been less publicly confrontative than other approaches, they are often successful even where other methods have failed.
Annual Stockholder Meetings
Shareholders who have a resolution before the company must present the resolution in person or by proxy. This is an opportunity to address concerns before the Board of Directors, management and other stakeholders.
A key tenet of socially responsible investing is the voting of proxies. Proxy voting gives shareholders a say in the workings of corporations, allowing those who own the company to decide on matters of corporate governance. Since most stockholders are unable to attend a company’s Annual General Meeting, they are able to vote on these matters by proxy instead. Board diversity, environmental and lobbying disclosure, and human rights policies are just some of the issues investors can support with their proxies. Reviewing both company and shareholder sponsored resolutions is critical in supporting good governance and effective socially responsible practices. Indeed, proxy voting is a unique opportunity for investors to both influence corporate behavior and align their values with their investments.
Proxy voting influences corporate social responsibility by sending a message to corporate leadership that an issue is of shareholder concern. Strong votes on shareholder resolutions not only allow those resolutions to continue to be filed, but also affect corporate decision making by creating media and reputational risks. Perhaps more importantly, strong proxy votes on shareholder resolutions can be translated into leverage in corporate dialogues. All of this ultimately translates into increased disclosure, policies aligned with values, and strengthened environmental and human rights practices.
For resources on proxy voting guidelines, as well as 2016’s social and environmental resolutions, click HERE.
Tri-State CRI offers a service to coalition members as well as other individuals and institutional investors to vote their proxies in a just manner. Contact us by email HERE to learn more about this service.